Rent growth slows to the lowest level in 18 months

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On January 24, 2022, a “Now Leasing” sign is displayed in front of an apartment complex in Washington, DC.

Stephanie Reynolds | AFP | Getty Images

The red-hot rental market is finally starting to cool down along with the rest of the housing stock.

Rents are still higher than a year ago, but profits are shrinking as landlords lose their pricing power in the face of inflation.

Rents rose 4.7% in October from October 2021, the slowest annual increase in 18 months, according to Realtor.com. The median rent in the US was $1,734.

“Our data indicates that we are finally starting to see some relief from the double-digit pace of rental growth that we experienced during the height of the pandemic,” said Danielle Hale, chief economist at Realtor.com. “While it is still a bit early to say we are officially on a downward trajectory for rents, the data shows a promising return towards normal seasonal slowdowns and suggests that the astronomical price increases of recent years may be behind us .”

A Realtor.com fall survey found that despite more tenants struggling to pay rent, the majority of landlords still said they would continue to raise rents in the coming year — albeit by a smaller margin than recently.

Rents are up 23.5% from October 2019, before the Covid19 pandemic hit. The biggest rental gains were in two-bedroom units as tenants looked for more space in the new work-from-home economy.

Year-over-year rental growth has now slowed for nine consecutive months and has been in the single digits for the past three months. But rents are still growing faster than just before the start of the pandemic, in March 2020.

Despite the cooler gains, more renters are considering moving because of affordability. Of those surveyed by Realtor.com who had seen their rents go up, 69.5% said they were considering looking for something cheaper, up from 66.2% in July.

The research concerns both multi-family and single-family homes. Other reports show apartment rents are cooling faster than those of single-family homes.

Single-family rental growth has been contracting for the past five months, but is still in the low double digits, according to CoreLogic. Rents rose 10.2% year-on-year in September, the most recent month for which data is available, up from nearly 14% growth in April this year, when interest rates really took off.

“High mortgage interest rates can cause potential homebuyers to pause and stay tenants, keeping rents under pressure,” said Molly Boesel, chief economist at CoreLogic. “However, monthly rent change was negative in September, resuming the typical seasonal pattern for the first time since 2019, which could be the start of normalization in rent growth.”

The pressure on multi-family rents is trickling down to both builders and investors. According to a report from the National Association of Home Builders, developer confidence in the multifamily housing market fell sharply in the third quarter of this year. The report tracks both production and occupancy of apartment buildings.

The number of multi-family homes under construction is at its highest level in nearly 50 years and construction spending continues to rise, but developers are starting to see signs of slowing down.

They cite high material and land costs, along with weakening financing conditions given the Federal Reserve’s recent monetary policy, as the main reasons for this drop in confidence, which is most affecting affordable housing projects. report.

The NAHB now predicts a significant decline in multi-family housing in 2023.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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